- Jettison the notion of preserving your credit score.
- Preserve cash and consider debt settlement to resolve credit card debt.
- Your job prospects will dictate your best course of action.
BILL'S ANSWER
Allow me to summarize your situation. You are unemployed, and your unemployment benefits are set to run out in six months. You did not mention your prospects on finding employment before your benefits expire. You have $12,000 in delinquent or near-delinquent credit card debt. The credit card issuer offered you a deal where you would close the account and pay $250 in low-interest payments for five years. You have a mortgage with terms you did not disclose, and a collector's vehicle that in addition to its sentimental value (you worked on it and want to gift it to your son) is worth as much as $60,000. You want to preserve your credit score.
It is difficult to answer your question without knowing more about your employment possibilities. As I write this in the third quarter of 2010, the US employment picture is still grim for many regions and job types. Construction jobs are non-existent, banking jobs are tough, and even attorneys are scrambling for clients. On the other hand, software development and sales jobs are easier to find. If you are in a region with a healthier economy or in field that is recovering faster, then you may find work before your benefits expire. The essential issue in your question is whether you will have an income as or before your unemployment benefits expire. I cannot address that issue.
If you assume the worst, then you need to jettison the notion of preserving your credit score. The last thing to worry about when you are in survival mode is your FICO score. Consider stopping payment on the credit card now and enroll in a debt settlement program. However, if preserving your FICO is your highest priority, then you need to get your collector vehicle to an auction now to raise funds to retire the credit card debt and have a cushion for paying your mortgage. However, if preserving your FICO and keeping the vehicle are your priorities, then put your house on the market today.
Regarding your questions about getting a better deal now or later or with a closed account or not, I do not see a difference from a credit score perspective. Threatening the credit card issuer with bankruptcy will not cause them to budge in negotiation. They have heard it before. In my experience, credit card issuers start to bargain when the account is charged-off, which occurs 120-180 days after the date of the last payment.
I hope this information helps you Find. Learn & Save.
Best,
Bill
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